Putting off writing your business plan just delays the day you can open your own coffee business. If you’ve done your homework and follow some basic guidelines, writing a business plan is not that difficult. In fact, you can put together a rough draft in a single day. Here’s how!
Get Organized. Before you sit down to write your business plan, you need to assemble background information about your business, starting with the location and terms of your lease.
You’ll also need to gather information about the coffee industry, including details about consumers, consumption patterns and industry trends. Much of this is available from industry groups such as the Specialty Coffee Association of America and from periodicals such as CoffeeTalk.
After you spend a couple of hours collecting and organizing this information, you’re ready to get started writing the plan. Your plan should consist of six sections, as described below.
Executive Summary. The first section should be the last page that you write. It highlights and condenses the key points from each section of the plan into a few sentences that tell the story of your business. Next to the financial data, this is the most important part of your business plan. Most bankers tell me they review the executive summary, and then turn to the financials if they are interested.
Business Description. Keep the business description brief. In this section, you need to supply:
- The name of the business
- Its location
- A list of items to be sold
- Pictures of the business
- A floor plan
- Leasing arrangements
- Architect/contractor estimates
- The name of the law firm you are using to review your lease and other contracts.
Management Profile. If you are the primary manager, include a summary of your resume. If you plan to hire managers or have a partner, you should include their education, employment record, skills, and accomplishments. You should also include details about the coffee business consultants who will be assisting with overall business strategy and staff training. Investors will have added confidence in your ability to succeed if you work with advisors with a proven track record.
A Statement about the Coffee Industry. Include information about:
- Major competitors
- Industry trends
- Customer demographics
- Sales sensitivity to economic cycles
- What makes you better (sets you apart from others)
- Key financial measures in the industry (profit margin).
Marketing Plan. Your marketing plan outlines:
- The location of your business
- The products you plan to sell (including a copy of your menu)
- A description of your targeted customers
- Why customers will buy from you
- How you will attract potential customers
Financial Data. The financial section of your business plan requires three documents: a cash flow statement, an income statement (also known as a profit & loss statement or P&L) and a balance sheet.
Cash Flow Statement. The cash flow statement helps to determine the short-term viability of a company, particularly its ability to pay bills. This document outlines:
- Your initial investment (beginning cash)
- The level of sales needed to break even (as discussed in last month’s CoffeeTalk)
- What expenses to expect, and
- How much money (if any) will be needed from outside sources
The cash flow statement also reflects investments in your business. Ending cash is the money in the bank at the end of the month after expenses have been paid.
The Income Statement/Profit & Loss Statement (P&L). In simplest terms, it represents Total Sales for the year – Expenses for the year. Most of the information needed to populate the income statement comes from the Cash Flow statement (sales, COGS, expenses). The only figures that you may need to obtain from an accountant are depreciation and taxes.
The Balance Sheet. This is the piece to the financial puzzle. It determines how much you’re worth! This is calculated with a basic formula: Total Assets (what you own) – Liabilities (what you owe) = Net Worth. Once you’ve completed the cash flow and income statements, the balance sheet mainly requires filling in the blanks. Total Assets consist of Assets (Cash and Inventory) plus Fixed Assets (Equipment minus Depreciation). Liabilities consist of Accounts Payable and Long-term Debt.
By the end of the day, you should have a solid draft of your business plan. Over the next week or so, polish your draft and fill in any missing information. You’ll then want to share your plan with coffee business consultants and other advisors to get feedback and further refine the plan.
Greg Ubert, founder and president of Crimson Cup Coffee & Tea, has been roasting coffee in small batches since 1991 and has taught hundreds of business owners how to run successful independent coffee houses. The author of Seven Steps to Success in the Specialty Coffee Industry can be reached at email@example.com.